Tax on savings

missymouse

I understand there is no tax up to £1000 of interest 

Is this each tax year.

how much capital would you need to generate this amount of interest 

the interest rates are so low

Dazed_and_C0nfused

There is no tax to pay on interest unless your total taxable income is more than £18,570  Or £17,310 if you have applied for Marriage Allowance.

You are presumably referring to the savings nil rate band (aka Personal Savings Allowance) but you can only use this if you have used up your Personal Allowance, when available, the savings starter rate.

The savings starter rate allows upto £5,000 of interest to be taxed at 0%. 

How much do you expect your taxable non savings and non dividend income to be in this tax year.  Things like taxable pay, pensions, self employment or rental income?

As interest rates are increasing you would probably need no more than £35,000 to get into the £1,000 area.  If that is actually relevant.

missymouse

my salary is above that figure on PAYE and I also have savings.

I naively thought the savings were separate to my earnings 

Yes the £3500 is relevant but the interest generated this tax year should be less than £1000

 I was going to stick a small matured ISA into a bond but I’m wondering whether it is better in my S&S ISA to protect it from taxation 

sheslookinhot

It will be protected from tax in your ISA.

Dazed_and_C0nfused

missymouse said:

my salary is above that figure on PAYE and I also have savings.

I naively thought the savings were separate to my earnings 

Yes the £3500 is relevant but the interest generated this tax year should be less than £1000

 I was going to stick a small matured ISA into a bond but I’m wondering whether it is better in my S&S ISA to protect it from taxation 

Tax can be way more complicated than that 🙂.

But if you are earning (in taxable pay) at least £5,000 more than your Personal Allowance and aren't close to being a higher rate payer then you will just have the savings nil rate band where upto £1,000 is taxed at 0%.

If you get taxable interest or say £1,200 it would be taxed like this.

£1,000 x 0% = £0
£200 x 20% = £40

So you need to weigh up the benefits of an ISA against the likely lower rates they will give.

Albermarle

 I was going to stick a small matured ISA into a bond but I’m wondering whether it is better in my S&S ISA to protect it from taxation

The decision to move money from a savings account into a S&S ISA, should not be driven by any minor tax issue.

If the investments in the S&S ISA were to go down 20% , the fact you had saved a few quid in tax would be neither here nor there.

That is not to say it would be bad decision, but it should be made for the right reasons i.e. you want to invest more in the hope of better growth in future but being aware that it could be a long haul.

missymouse

I think I will stick it in the bond  for 2 years paying 2.65% tbh

the S&S ISAs aren’t doing well and I can still add money to them from other savings over 2022. I know it’s a long term investment but like you say it’s rotten when you put the money in and it immediately drops in value wiping out the interest